Ever wonder which corporate actions require board of directors’ approval and which require shareholders’ approval?

This depends on the division of management powers between directors and shareholders of a company.

Sources of powers

The main sources which set out and divide the management powers between directors and shareholders are as follows:

1. The Companies Act 2016 (“Companies Act”);

2. Constitution; and

3. Bursa Listing Requirements (for public listed companies).

Section 211 of the Companies Act provides that:

(1) The business and affairs of a company shall be managed by, or under the direction of the Board.

(2) The Board has all the powers necessary for managing and for directing and supervising the management of the business and affairs of the company subject to any modification, exception or limitation contained in the Companies Act 2016 or in the constitution of the company.

Other than a company limited by guarantee, it is not mandatory under the Companies Act for a company to have a constitution.

For a company that adopts a constitution, you should consider how the provisions in the constitution modifies or limits the general powers of directors under section 211 of the Companies Act.

Provisions in the constitution which contravene or are inconsistent with the mandatory provisions of the Companies Act are invalid.

The default provisions in the Companies Act apply if a company does not have a constitution.

Directors’ powers

The Companies Act 2016 vests, among others, the following powers in board of directors:

1. Forfeiture of shares of shareholders who fails to pay any call within stipulated time and fails to comply with notice requiring payment (section 83).
2. Registration of share transfer (section 106).
3. Registration of transmission of shares and debentures (section 109).
4. Sale of shares subject to a lien (section 111).
5. Issuance of a solvency statement in relation to redemption of preference shares, reduction of share capital, financial assistance, and share buyback (section 113).
6. Authorisation of a distribution of dividend of a solvent company (section 132).
7. Removal of a secretary from office in accordance with terms of appointment or constitution (section 239).
8. Power of directors of a holding company to decide whether the financial year of any of its subsidiary companies should not coincide with the holding company (section 247(3)).
9. Approval of the financial statement and directors report (sections 251 and 252).
10. Appointment of first auditor or appointment of auditor to fill a casual vacancy in the office of auditor (section 267(3) for private companies and section 271(2) for public companies).
11. Fixing of company auditor’s remuneration if appointed by the Board (section 274(1)(b)).
12. Approval to effect insurance for an officer or auditor of the company (section 289(5)).
13. Convene a meeting of members on the Board’s initiative (section 310).
14. Appointment of an approved liquidator to be the interim liquidator (section 440).

Shareholders’ powers

The Companies Act 2016 vests, among others, the following powers in shareholders:

1. Change to name of company (section 28).
2. Alteration or amendment to constitution (section 36).
3. Conversion from an unlimited company to a limited company (section 40(1)).
4. Conversion from public companies to private companies and vice versa (sections 41(1) and 41(2)).
5. Approval for the exercise of directors’ power to allot shares, grant rights to subscribe for shares, convert any security into shares in the company, and allot shares under an agreement or option or offer (sections 75 and 76).
6. Alteration of share capital (section 84).
7. Variation of class rights (section 91).
8. Share capital reduction (sections 115, 116 and 117).
9. Removal of directors of a company (section 206).
10. The making of any loan, or the entering into any guarantee or the provision of any security to a director of a company or of a company which is related to the first mentioned company to (a) provide such director with funds to meet the expenditure incurred or to be incurred by him for the purposes of the company or for the purpose of enabling him properly to perform his duties as an officer of the company; or (b) to provide such a director who is engaged in the full-time employment of the company or its holding company with funds to meet expenditure incurred or to be incurred by him in purchasing or otherwise acquiring a home (sections 224(2) and 224(3)).
11. Payment by a company to a director by way of compensation for loss of office as an officer of that company or of a subsidiary of that company or as consideration in connection with his retirement from any such office (section 227).
12. Entering or carrying into effect any arrangements or transactions where a director or a substantial shareholder of the company or its holding company, or its subsidiary, or a person connected with a director or substantial shareholder, acquires or disposes shares or non-cash assets of the requisite value, from or to the company (section 228).
13. Approval for fees of the directors, and benefits payable to the directors including any compensation for loss of employment of a director or former director of (a) a public company;
    or (b) a listed company and its subsidiaries (section 230(1)).
14. Approval for fees of the directors, and benefits payable to the directors including any compensation for loss of employment of a director or former director of a private company if members holding at least 10% of the total voting rights and who consider that the payment was not fair to the company require shareholders’ approval for the payment (section 230(4)).
15. Appointment of an auditor of a private company in subsequent years following the submission of the company’s first financial statements and if the Board fails to appoint an auditor under section 267(3) (section 267(4)).
16. Appointment of an auditor of a public company (a) at the annual general meeting; (b) if the company should have appointed an auditor at an annual general meeting but failed to do so; or (c) if the Board fails to appoint an auditor under section 271(2) (section 271(4)).
17. Removal of auditors (section 276).
18. Compromise or arrangement with creditors and members (section 366).
19. Voluntary winding up of a company (section 439).
20. Removal of liquidators in members voluntary winding up (section 445(3)).
21. Power to fill vacancy in office of liquidator (section 446).
22. Conferment of powers upon a liquidator in a voluntary winding up (section 456 and Eleventh Schedule).
23. Petition to the court for winding up of a company under an order of the court (section 464).

This post was originally posted on Linkedin on 2 February 2022. Follow me on Linkedin.